As a business owner it can be tempting to look at all the money going out and worry about spending. That’s good and healthy, but too much worry can mean that you’re not making the right investments to help your business grow. I see this especially happen with marketing decisions. Instead of thinking of marketing cost, think about marketing investment.
Marketing is an Investment
Investments are vital to growing a business because they give back more than they cost. Just like any financial investment, successful marketing should always give back more than it costs, whether that is in direct sales, improved branding or sentiment, or reduced customer service costs. To grow a business, decisions need to be made to spend money in order to make more money down the line. The same is true with marketing decisions.
Marketing Always Has a Return
While marketing may not always have an obvious financial return, successful marketing always has a return of some sort. And even the outcomes that aren’t directly connected to revenue will have an impact on it. Here are some possible returns:
- Increasing sales revenue — the obvious return when a marketing effort leads to direct sales.
- Driving lead generation — clearly linked to sales is the generation of quality leads.
- Increasing brand awareness which may lead to purchase consideration ($) down the line.
- Building community — Having a loyal, enthusiastic community can lead to returns in each of the other areas, plus the word-of-mouth referrals are worth their weight in gold.
- Improving customer service — Customer support can cost ($) a company quite a bit in resources, returns and bad reputation. Marketing can help improve all of these areas. Good customer service also leads to repeat purchases ($) and referrals ($).
- Providing R&D Insights — With so much information available online for free, the ability to do marketing research is unparalleled. What used to be a costly survey or research project can often be discovered just by asking questions and doing some searching (not always). Having good marketing research improves products to increase sales and improve customer support.
Look Beyond ROI
Much is discussed when it comes to marketing ROI (return on investment). ROI is a financial term with a very specific formula: ROI = (gain from investment – cost of investment) / cost of investment. ROI is vital for investments in order to determine if they are worthwhile and successful. It is also vital to measure marketing efforts in order to determine if they have been successful.
When a clear financial gain is possible to track, marketing ROI is easy to calculate. But many marketing activities do not lead to direct financial returns (although they probably impact them). However, if you look beyond the term ROI, and instead think about returns, it becomes possible to evaluate the effectiveness of marketing activities. Many companies require an actual monetary return to be calculated for any marketing activities, which is fine, as long as you realize that there is some estimations involved (such as the value of increasing brand awareness).
Long-term Cause & Effect
If you start to look at the trending of your metrics (leads generated, sales, etc.), and plot the timing of your marketing efforts, it is possible to identify what marketing activities had an effect on jumps and declines in the metrics (especially if marketing efforts are taken in concert with one-another and are targeted). When you look at these long-term trends, it is possible to identify reasonable estimations of marketing ROI.
Considerations for Marketing Investments
When deciding whether to make a marketing investment, it is always crucial to think in terms of the estimated returns. Just remember that returns can go beyond ROI. Consider how much the marketing efforts will cost (in time & resources, as well as cash), and what they will get you in return. Going beyond just the cost of marketing and instead considering beneficial returns makes marketing a vital investment for business growth.
What do you think?
